UK Support For Glaxo But None For Whistleblowers?

Erika Kelton
, ContributorI write about whistleblower matters involving fraud and other issues.Opinions expressed by Forbes Contributors are their own.

UK Prime Minister David Cameron voiced support for GlaxoSmithKline in China but has kept quiet about proposals to support whistleblowers who expose corporate wrongdoing. (Photo: Wikipedia)

UK Prime Minister David Cameron unexpectedly stood up for
GlaxoSmithKline earlier this month in response to China’s allegations that the pharma giant bribed hospitals, doctors and government officials to increase sales of its drugs.

Cameron told reporters while in China on a trade mission that “From all my dealings with GSK, I know that they are a very important, very decent and strong British business that is a long-term investor in China.”

With corruption allegations still being investigated in China and elsewhere, it is fair to question Cameron’s characterization of Glaxo’s business. After all, in the past few years the company and a subsidiary have pled guilty to criminal charges related to the manufacturing, distribution and marketing of certain prescription drugs and medications, and Glaxo has paid billions in civil fines to the U.S. To many, Glaxo’s corporate culture is a work in progress – a partial ethical makeover pushed on the company in large part by significant whistleblower actions in the U.S.

Whistleblower-initiated actions led to Glaxo’s $3 billion civil and criminal settlement in 2012 (my firm brought a whistleblower case that was a major part of that settlement) and a separate $750 million settlement with the US government in 2010. The allegations in the more recent case included claims strikingly similar to those being made now about Glaxo’s marketing practices in China and parts of Europe – i.e., that the company engaged in illegal and unethical marketing by providing generous financial and personal inducements to doctors who prescribed Glaxo’s drugs.

Just as significant as the hefty fines was the impact the whistleblower cases had in three major ways on how Glaxo does business.

First, Glaxo ended compensation practices that were based primarily on sales revenue, which had incentivized illegal marketing activities. Glaxo changed its compensation plans while negotiating with the government a settlement of the whistleblower cases and later signed a “corporate integrity agreement” with that provision.

Another important feature of the corporate integrity agreement is a “clawback” provision that holds Glaxo executives personally accountable. Glaxo must recoup up to three years of performance-based pay, such as annual bonuses, from any senior executive who was involved in significant misconduct or supervised employees who engaged in significant misconduct that the executive knew or should have known was occurring.

Third, Glaxo was required to set up a compliance committee to oversee manufacturing plants worldwide to ensure all company facilities adhere to good manufacturing practices.

A whistleblower probably is behind China’s investigation into Glaxo, too. If so, that whistleblower also has affected the company’s long-time practices. Glaxo announced last week that it will no longer pay doctors to promote the company’s drugs and will stop tying sales representatives’ compensation to the number of prescriptions doctors write. The company says the changes are unrelated to the investigation in China. Whatever the reason, Glaxo probably never would have adopted any of its marketing and sales reforms without whistleblowers exposing illegal and unethical practices.

Unlike the US, the UK does not offer financial rewards to whistleblowers for stepping forward with information about significant wrongdoings. The Home Office urges consideration of a model based on the US False Claims Act, which rewards whistleblowers with 15 percent to 30 percent of funds the government collects as a result of whistleblowers and their counsel. The law also provides protection to whistleblowers from job retaliation. Similar incentive reward programs are now in place at the US Securities Exchange Commission, the Commodity Futures Trading Commission and the Internal Revenue Service.

Because of those incentives and job protection, whistleblowers have helped the US government recover more than $50 billion in civil settlements and criminal fines. A recent study found that for every dollar the US spends on whistleblower programs, it recovers at least $20.

Demand for a robust whistleblower program in the UK is growing. The greatest number of whistleblowers who turn to the US from outside the country are from the UK, according to the SEC’s latest report on its whistleblower program. But the SEC and DOJ can act only if the US has jurisdiction and the charges involve violation of US laws. If not, UK authorities are unlikely to ever learn about the wrongdoing.

A strong whistleblower reward program would revolutionize enforcement in the UK much as it has in the US and add much needed resources to enforcement efforts. Yet, the Home Office proposal has been met with only silence for the most part from government officials and politicians.

Let’s hope Cameron considers whistleblowers to be just as “decent” as Glaxo and speaks up on their behalf by supporting the Home Office proposal.